New federal rule will overhaul transmission planning as electric grid strains

This article was first published on the New Jersey Monitor. Read the original here. 

A divided Federal Energy Regulatory Commission on Monday issued a long-awaited overhaul of how regional electric transmission lines are planned and paid for, a move cheered by clean power groups but blasted by a conservative commissioner who said it was driven by “special interests” and exceeds the commission’s authority.

The commission’s final rule on transmission planning and cost allocation, intended to prod utilities and grid operators across the country into more forward-looking, comprehensive and cost-effective planning of large electric transmission lines and better account for the broad benefits those wires provide, was nearly three years in the making. It passed on a 2-1 vote, with the commission’s two Democratic appointees voting yes and the lone Republican opposed.

FERC Chairman Willie Phillips said an aging grid, increasing severe weather, demand growth from new manufacturing, data centers and increasing electrification as well as a changing generation mix all threaten reliability at a time when construction of the high voltage transmission lines that help get power to where it’s needed has slumped to a record low.

“This rule cannot come fast enough. There is an urgent need to act to ensure the reliability and the affordability of our grid,” Phillips said. “We simply will not be able to address these converging challenges and continue to supply the reliable, abundant and affordable power the American people depend on without taking a clear-eyed, long term, forward-looking approach to transmission planning.”

But Commissioner Mark Christie, a conservative former Virginia utility commissioner, vehemently dissented to the rule, calling it “a pretext to enact a sweeping policy agenda that Congress never passed” and one that will “facilitate a massive transfer of wealth from consumers to for-profit special interests.”

Christie has long opposed transmission cost allocation schemes that he claimed would force customers in some states to pay for the pro-renewable policies of their neighbors. “I was perfectly prepared to vote for this final rule if it were a bipartisan compromise, if it preserved the state role that everyone sitting up here voted for two years ago,” he said.

The Genie and the Bottle

The sprawling rule requires transmission operators to conduct transmission planning at least every five years, looking out along a 20-year horizon using “best available data to develop well-informed projections” of needs, according to a staff presentation. To identify those transmission needs, providers need to consider state laws and regulations, utility planning documents, fuel cost trends, power plant retirements, requests from developers looking to connect to the grid as well as “policy goals and corporate commitments.” They also must consider “grid-enhancing technologies,” a suite of potentially cost-saving tools common in other countries that have been slow to take root in the U.S., despite years of prodding from advocates, as well as identifying opportunities to upgrade existing lines their capabilities, called “right-sizing.”

Transmission providers, including utilities and the organizations that manage the grid in much of the country, are also required to use a list of seven economic and reliability benefits as they evaluate and select long-term regional transmission projects as well as establish an evaluation process with transparent selection criteria that are not “unduly discriminatory or preferential, aim to ensure that more efficient or cost-effective long-term regional transmission facilities are selected and seek to maximize benefits accounting for costs over time without over-building transmission facilities.”

Christie criticized those “mandated inputs” and said states have no ability to consent to those criteria.

A major big problem FERC is trying to fix is that even as construction of large transmission projects has nearly ground to a halt, utilities in many parts of the countries are on a building spree of smaller — potentially duplicative and inefficient — projects that are easier to get approved and paid for, increasing customer bills.

“The absence of this type of regional transmission planning is resulting in piecemeal transmission expansion that addresses relatively near-term transmission needs,” the staff presentation reads. “The status quo approach results in transmission providers investing in relatively inefficient or less cost-effective transmission infrastructure, with the costs ultimately recovered through commission-jurisdictional rates. This dynamic results in, among other things, transmission customers paying more than is necessary or appropriate to meet their transmission needs, and customers missing out on benefits that outweigh their costs, which results in less efficient or cost-effective transmission investments.”

For example, proponents of the new rule point to hundreds of millions of dollars in transmission costs that will result from the closure of a Maryland power plant in the region overseen by PJM Interconnection, the nation’s largest grid operator, as an example of poor planning.

“It is hard to imagine the region could not have found a more cost-effective solution had it begun planning for that retirement along with other anticipated shifts further ahead of time,” said Democratic Commissioner Allison Clements, who took Christie to task over his dissent. She said he was pushing the commission to take a “fraught voyage” to decide which public policies are appropriate for creating transmission demands.

“All transmission needs are inherently influenced by state policies of all stripes,” she said. “The truth is that enormous sums of money are going to be spent on transmission investment regardless of whether or not it’s done within the framework of this new rule.”

She argued that the new rule will protect customers from the pricey, fits-and-starts transmission buildout happening in much of the nation now.

“Not everything is about politics,” she said. “It is not the commission’s job to try and force the genie that is the energy transition back in the bottle. It is our legal responsibility to protect consumers in light of whatever is going on in the world around us.”

Neil Chatterjee, a Republican former FERC chairman, posted on X that he would have voted for the rule if he was still on the commission.

“Today’s @ferc rule was voted out 2-1 but that does NOT mean it’s a partisan rule making,” he wrote. “Had I authored this rule as chair would it have looked exactly like this? Of course not. But it would have been in the range. Regulatory rule making is hard.”

‘Benefit of Having a Big Grid’

Competitive transmission providers and clean energy groups were celebrating Monday. Organizations ranging from the American Council on Renewable Energy and the National Audubon Society to the Conservative Energy Network and Americans for a Clean Energy Grid issued statements applauding the order.

Some renewable power organizations had privately wondered whether a drive for a unanimous vote might produce a more watered-down rule to get Christie onboard. That might have left states with big renewable power goals paying for all the transmission costs necessary to accommodate them, as New Jersey is doing for its planned offshore wind buildout, even though that power generation could mean cheaper, cleaner electricity for its neighbors, also, along with other benefits.

The U.S. Department of Energy has found a “pressing need” for new transmission infrastructure across the country to alleviate congestion and improve reliability. Grid congestion costs electric customers billions of dollars a year, according to some reports. And because of the more diffuse nature of renewable power, getting it from where it’s produced to where it’s needed, as in the vast amount of wind power in the Great Plains, can require large, multi-state transmission lines.

“Families and businesses are paying the price for utilities’ and grid operators’ failure to address our critical electricity infrastructure needs,” said Heather O’Neill, president and CEO at national clean power business association Advanced Energy United. “Building more multi-state transmission lines unclogs the traffic jams on America’s electricity superhighways and unlocks our ability to keep up with our growing energy needs.”

Justin Vickers, a senior attorney for the Sierra Club, said the rule appears to be firmly within FERC’s jurisdiction, despite Christie’s concerns to the contrary.

“I think the commission is on very strong footing here,” he said. “This is a way of maximizing the benefits of living in a big country. We can send power around the country. It increases reliability and it lowers price. That’s the benefit of having a big grid. .. Let’s take advantage of it.”

The Edison Electric Institute, which represents investor-owned utilities, said it was “disappointed” that FERC declined to include a “right of first refusal” policy for some transmission projects, which would have given their members first crack at some of the lines. The organization also said the rule lacked “regional flexibilities for evaluating project benefits.”

“A one-size-fits-all approach does not work, as different regions have different needs and different states have different policies,” said Phil Moeller, an executive vice president at the institute.

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